The easiest way to become a trade-a-saurus is to assume correlations will continue forever and mindlessly fade divergences with the assumption they will recouple. Yet these divergences often offer clues that something might have changed and deserve further investigation.

If 2016 taught traders anything, it was that old norms were useless and the concept of the market as a discounting mechanism (as opposed to an algo-driven headline-reacting maelstrom of manias) is lost forever. This flipping of reality is nowhere more evident in the topsy turvy shifts in risk expectations across global asset classes - where 'safe' is now riskiest and 'riskiest' is now safe.

"The world has fundamentally shifted over the last decade, especially since we’ve emerged from the Great Recession... But the professional class has been very slow to understand what is going on, not just quantitatively but qualitatively in a new generational configuration that I call the Fourth Turning. They don’t accept the new normal. They keep insisting, just two or three years out there on the horizon, that the old normal will return – in GDP growth, in housing starts, in global trade. But it doesn’t return."

At the start of September last year, as stocks began to ramp aggressively off the Black Monday crash lows, we unveiled a rather discomforting "decoupling" that suggested strongly "don't believe the hype." Four months later, and able to remain strongly convicted of the trade, the inverse VIX ETF (XIV) and the S&P 500 ETF (SPY) have recoupled back at the lows from August 24th. We await the recoupling of equity exuberance to credit curmudgeon-ness...

Overnight weakness on the back of 8-month highs in Chinese crude inventory (combined with the recent plunge in super-tanker rates - i.e. China is no longer refilling its SPR) sent WTI Crude towards the critical $44 level (which has acted as support for 2 months). The China rate cut weakened crude further as PBOC admitted it was needed because of the state of the economy. And then Baker Hughes reported a total rig count unchanged 787 (lowest since April 2002) and an oil rig count decline of just 1 to 594 (the 8th weekly drop in a row). WTI slipped on the news.

For the first time since October 2010, VIX has fallen for 10 straight days (crashing from over 28 to under 17). The collapse in the 'fear' index has also broken it back below its 200-day moving-average for the first time since breaking above on August 19th.